JOURNAL ARTICLE

Direct Fit for SVI Implied Volatilities.

  • Published In: Journal of Derivatives, 2024, v. 31, n. 3. P. 38 1 of 3

  • Database: Business Source Ultimate 2 of 3

  • Authored By: Schadner, Wolfgang 3 of 3

Abstract

The author fully linearizes the stochastic volatility inspired (SVI) formula by rewriting it into the algebraic form of a conic section. This step reduces the complexity of the otherwise non-linear optimization problem drastically. Based on the conic representation, the author introduces the direct least-squares for SVI, which enables him to fit the model in a non-iterative and thus computationally efficient manner. The performance of the proposed method is evaluated upon empirical data of seven different asset classes. It significantly outperforms the existing benchmark algorithm in terms of computational speed while achieving a similar quality of fit. Concluding on that, the direct SVI fit qualifies as a robust method for calibrating implied volatilities in real-time. [ABSTRACT FROM AUTHOR]

Additional Information

  • Source:Journal of Derivatives. 2024/03, Vol. 31, Issue 3, p38
  • Document Type:Article
  • Subject Area:Mathematics
  • Publication Date:2024
  • ISSN:1074-1240
  • DOI:10.3905/jod.2023.1.199
  • Accession Number:176089198
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